Cryptocurrency is a type of digital currency that operates on decentralized networks using blockchain technology. Unlike traditional currencies issued by central banks, cryptocurrencies function without a central authority. Transactions are recorded on a public ledger called the blockchain, which is maintained by a distributed network of computers, known as nodes. These nodes validate transactions through consensus mechanisms like Proof of Work or Proof of Stake.

This decentralized structure ensures transparency, reduces the risk of fraud, and removes the need for intermediaries like banks. Each transaction is encrypted and time-stamped, providing a secure and permanent record. Users store and manage their cryptocurrency using digital wallets, which contain cryptographic keys to access their assets.

The value of a cryptocurrency is determined by market supply and demand, not by central policy. This system allows peer-to-peer transactions across borders, often with lower fees and faster processing times compared to traditional banking systems.